WEBVTT - Markets, Private Equity, And Jackson Hole (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.960 at Bloomberg dot com slash podcast. All right, let's talk 0:00:22.000 --> 0:00:24.840 to Phil Plumbo. He's a founder, CEO and CIO Plumbo 0:00:24.880 --> 0:00:28.560 Wealth Management. Phil, do we have another leg down in 0:00:28.640 --> 0:00:31.040 this market? I kind of. I'm just not sure how 0:00:31.120 --> 0:00:35.000 much I should really buy into this bounce off the bottom. 0:00:35.000 --> 0:00:37.680 What say you? Well, you took the words out of 0:00:37.720 --> 0:00:39.400 my mouth, right, So we're still in the middle of 0:00:39.400 --> 0:00:41.360 this storm. And the way I look at it is 0:00:41.479 --> 0:00:45.080 the FED said that inflation was gonna be transitory. Were 0:00:45.120 --> 0:00:47.960 the furthest thing from transitory? The FED says that we're 0:00:48.560 --> 0:00:51.680 not in a recession. We had two back about quarters 0:00:51.720 --> 0:00:53.600 of negative GDP. As long as I've been doing that, 0:00:53.640 --> 0:00:56.440 it's always been the definition. I totally get the tight 0:00:56.560 --> 0:00:59.720 label market. So technically probably when not in a recession. 0:00:59.760 --> 0:01:02.240 Now it everything the FED is doing on and is 0:01:02.360 --> 0:01:05.560 doing and is embarking on right. All of that still 0:01:05.600 --> 0:01:08.800 needs to be absorbed into the economy, and it takes time. 0:01:09.319 --> 0:01:11.160 It takes six months to take a year, to take 0:01:11.160 --> 0:01:13.280 a year and a half. So at some point this 0:01:13.400 --> 0:01:15.640 data will continue to worsen. When you think about p 0:01:15.840 --> 0:01:20.240 WC survey firm said they're gonna they're anticipating layoffs. The 0:01:20.240 --> 0:01:24.000 inverted yield curve, sentiment again is high. You look at 0:01:24.040 --> 0:01:27.280 the multiples on Amazon and Apple. Forward on Amazon is 0:01:27.280 --> 0:01:30.640 fifty six Apples twenty six times in both the growing 0:01:30.680 --> 0:01:35.920 revenue one another one at seven percent. So valuations still 0:01:36.000 --> 0:01:37.800 have to come in and there is going to be 0:01:37.840 --> 0:01:39.880 another leg down that will retest the loads that we 0:01:39.959 --> 0:01:43.600 saw back in June. But what's the what's the driver 0:01:43.720 --> 0:01:47.800 of that retesting of the lows? Is it the FED hike? 0:01:48.080 --> 0:01:51.560 Is it recession worries? Is it it slowed out in consumption. 0:01:51.680 --> 0:01:55.200 I mean, I'm admittedly at faulty because I'm a journalist 0:01:55.200 --> 0:01:57.440 and I was repeatedly told by traders not everything has 0:01:57.440 --> 0:01:59.800 a fundamental narrative. But why do you sell out of 0:01:59.800 --> 0:02:03.280 this market when capital flows from other countries and really 0:02:03.320 --> 0:02:05.880 the rest of the world could actually provide some sort 0:02:05.880 --> 0:02:09.160 of support and everything has a fundamental narrative if you're 0:02:09.160 --> 0:02:10.919 a trader in the short term, but over the six 0:02:10.960 --> 0:02:13.400 twelve month period, which is a long term period, with 0:02:13.520 --> 0:02:16.520 everything that the FETE is doing, and because we're in 0:02:16.520 --> 0:02:19.200 a tight labor market means inflation could be more persistent. 0:02:19.240 --> 0:02:21.480 We means the FETE has to act even more aggressively 0:02:21.560 --> 0:02:24.480 or continue to be aggressive, and all of that is 0:02:24.480 --> 0:02:28.040 not a positive for stocks. And ultimately, what happens our 0:02:28.160 --> 0:02:31.840 company's executives, they're making decisions to lay off, They're gonna 0:02:31.880 --> 0:02:36.880 You're gonna see analysts revise earnings, revision of earnings of 0:02:36.919 --> 0:02:42.600 ten to off of what prediction is that brings you 0:02:42.639 --> 0:02:45.799 out of forward multiple today of y two times, which 0:02:45.840 --> 0:02:48.280 is basically where we were in the middle of January. 0:02:48.320 --> 0:02:51.840 So that's not attractive thinking about what the FETE is 0:02:51.840 --> 0:02:55.440 embarking on and how inflation could be sticky. So so 0:02:55.560 --> 0:02:56.960 what do you what do you tell your clients about? 0:02:57.000 --> 0:02:59.680 You know, given that backdrop your call there for equities, 0:02:59.720 --> 0:03:01.760 I mean, I see the in the first half of 0:03:01.760 --> 0:03:06.480 the year, the terrible, terrible underperformance of fixed income across 0:03:06.560 --> 0:03:09.720 the board, whether it's corporates or treasuries, investment created high yield, 0:03:09.720 --> 0:03:12.399 there's nowhere to hide. So if we've got another leg 0:03:12.440 --> 0:03:16.040 down here, what are you telling your clients these days 0:03:16.120 --> 0:03:17.799 in terms of if they if they have some new 0:03:17.800 --> 0:03:20.280 money to put the work. Maybe a couple of things right. 0:03:20.320 --> 0:03:22.200 So I've been very consistent, whether it's on your show 0:03:22.280 --> 0:03:24.280 or anywhere else, that we were in the tech bubble 0:03:24.320 --> 0:03:27.480 that burst. We thought we the stock market as a whole, 0:03:28.080 --> 0:03:31.959 was in a bubble, right. That came down to troll. 0:03:32.480 --> 0:03:36.920 The technology got got killed as well. So coming into 0:03:36.960 --> 0:03:39.920 this year, we're aggressive in cash and we still are today. 0:03:40.200 --> 0:03:43.240 We're being we're being very patient like buffets all the time, 0:03:43.440 --> 0:03:44.960 wait for the perfect pitch. You know, we're not out 0:03:44.960 --> 0:03:46.960 of the situation where we're having a perfect pitch right now, 0:03:47.000 --> 0:03:50.280 so we're being completely patient. Scenario, we had great returns, 0:03:50.280 --> 0:03:54.800 everybody did right go in one, So being patient here 0:03:54.800 --> 0:03:58.040 in twenty two with everything going on is perfectly fine 0:03:58.080 --> 0:04:02.920 thing to do. I'm still I've got to say, I'm curious, though, 0:04:03.320 --> 0:04:05.200 what else do you put your money in? I mean, 0:04:05.240 --> 0:04:07.840 if you're pulling out of stocks and let's say going 0:04:08.040 --> 0:04:11.760 to cash, for example, does that mean money markets? Does 0:04:11.800 --> 0:04:15.040 that mean just blocking the dollars straight out. Where does 0:04:15.080 --> 0:04:17.400 that money go? Yeah, for us, we put it in 0:04:17.480 --> 0:04:19.559 money markets that can kneel between one and two percent. 0:04:19.680 --> 0:04:21.560 It's not a great return, especially when you factor an 0:04:21.560 --> 0:04:24.920 inflation completely. Get that. But if we do get a 0:04:25.000 --> 0:04:27.200 great pitch thrown at us and it's a good time 0:04:27.240 --> 0:04:29.880 to put capital to work where we can make great 0:04:29.920 --> 0:04:33.000 returns over a three to five year period, then I 0:04:33.040 --> 0:04:34.880 mean that could happen over the next two to three months. 0:04:34.880 --> 0:04:36.839 So even though the return in cash is not great, 0:04:37.160 --> 0:04:39.559 it's the opportunity that we're looking for that we believe 0:04:39.560 --> 0:04:43.240 will will occur that will make up for any type 0:04:43.279 --> 0:04:46.080 of low return you're getting in cash today. We also 0:04:46.120 --> 0:04:49.200 are invest in gold. We're also in commodities as a diverse, 0:04:49.279 --> 0:04:52.280 floid balanced portfolio, and obviously we have some exposure to 0:04:52.279 --> 0:04:55.200 equities as well. How do your clients fill Did they 0:04:55.200 --> 0:04:59.560 ask you about crypto bitcoin specifically? And if so, what 0:04:59.600 --> 0:05:01.680 do you do you? What do you tell them? Yeah? 0:05:01.680 --> 0:05:03.520 The answer is just like I think of growth socks. Right, 0:05:03.560 --> 0:05:05.280 when you're investing in growth socks, you're trying to make 0:05:05.279 --> 0:05:06.880 a prediction of how much a product is going to 0:05:06.960 --> 0:05:09.440 be sold with that company over a long period of 0:05:09.440 --> 0:05:12.080 time and and that prediction is just so speculative. Right, 0:05:12.160 --> 0:05:14.560 So when you think about like bitcoin and ethereum and others, 0:05:14.800 --> 0:05:19.000 you're talking about something that is complete speculation. So why 0:05:19.000 --> 0:05:22.039 would I invest my client's hard own capital and something 0:05:22.080 --> 0:05:24.000 that is speculative. Yeah, it could turn out great, but 0:05:24.040 --> 0:05:26.880 also could turn out terrible. Right, So when it comes 0:05:26.880 --> 0:05:29.560 to investing, I really believe it's about risk in return profile. 0:05:29.680 --> 0:05:32.440 So I'd rather buy a great company like McDonald's or 0:05:32.480 --> 0:05:35.520 Coca Cola or Fiser have free cast full yields of 0:05:35.560 --> 0:05:38.240 north six seven percent or eight percent or more than that, 0:05:38.600 --> 0:05:40.600 which is two to three times a ten year treasury, 0:05:41.279 --> 0:05:45.320 with stable earnings, great management, great economic mode. For me, 0:05:45.560 --> 0:05:47.719 that's how you invest capital and a little long term 0:05:47.800 --> 0:05:50.839 you'll succeed, all right, Phel always great to get your thoughts, 0:05:50.920 --> 0:05:53.440 your perspective. You've been in this game a long time. 0:05:53.440 --> 0:05:56.800 You always appreciate your experience. Filth Plumbo founder, CEO and 0:05:56.839 --> 0:06:04.000 c IO of Plumbo Wealth Management. There pretty I always 0:06:04.000 --> 0:06:05.600 think about, like who would I not want to hang 0:06:05.600 --> 0:06:08.200 out with at a cocktail party. Here's this person be 0:06:08.400 --> 0:06:12.000 a in economics and statistics from Berkeley, and then she 0:06:12.040 --> 0:06:14.760 goes and gets a PhD in economics from the University 0:06:14.800 --> 0:06:17.480 of Chicago. I mean, you don't want to hang out 0:06:17.480 --> 0:06:19.080 with her at a cocktail par I'm not sure, but 0:06:19.560 --> 0:06:21.160 Anna Wong is a good buddy of ours. She's a 0:06:21.200 --> 0:06:24.000 chief US economist for Bloomberg Economics, and I thanks so 0:06:24.080 --> 0:06:25.560 much for joining us. I don't mean, I don't mean 0:06:25.600 --> 0:06:29.000 to prejudge, but boy, that's some resume there. What are 0:06:29.040 --> 0:06:32.800 you looking for tomorrow coming out of Jackson Hole, Wyomings? 0:06:33.080 --> 0:06:35.080 You know, in addition to seeing what Tom King's gonna 0:06:35.120 --> 0:06:40.920 wear tomorrow? Well, I, like everybody, I'm expecting a hawkish speech. 0:06:41.040 --> 0:06:44.560 I expect that Power will ressert that the FED is 0:06:44.720 --> 0:06:49.440 unconditionally committed to restoring inflation that to its price press target. 0:06:49.839 --> 0:06:52.760 He is going to say that he will keep rates 0:06:52.760 --> 0:06:56.680 in shift of territory until you see compelling evidence that 0:06:56.720 --> 0:06:59.160 inflation is coming down. You know, the same same old 0:06:59.240 --> 0:07:02.880 hawkish words. Um. But I think the interesting thing is 0:07:03.040 --> 0:07:06.400 how whether the whether the speech would be hawkish enough 0:07:06.440 --> 0:07:10.960 for the markets to kind of quash the thought that 0:07:11.080 --> 0:07:13.600 you know that the FED is ready to cut rates 0:07:13.600 --> 0:07:17.200 in three UM. And I think in order to do 0:07:17.240 --> 0:07:21.400 that um, power will have to be extra hawkish, for example, 0:07:21.520 --> 0:07:25.320 giving some numerical guidance saying that that the FED will 0:07:25.320 --> 0:07:28.520 not cut until core inflation comes down to close to 0:07:28.560 --> 0:07:31.960 two percent, something like very concrete like that. But I 0:07:32.280 --> 0:07:34.560 just don't I see very little chance you will be 0:07:34.600 --> 0:07:37.400 doing that though. Well, and I mean you got you 0:07:37.600 --> 0:07:40.400 and your team at Bloomberg Economics came out I think 0:07:40.440 --> 0:07:42.960 a couple of months ago, which what at the time 0:07:43.200 --> 0:07:46.000 I thought was just way way way out of consensus 0:07:46.040 --> 0:07:49.400 call that the FED might take the FED funds rates 0:07:49.480 --> 0:07:52.600 up to five percent. Is that correct or is that 0:07:52.640 --> 0:07:56.040 still your call? Yeah? That that is still our call, 0:07:56.080 --> 0:07:58.600 and I think that by each day the chance of 0:07:58.720 --> 0:08:02.760 that call is increasing. Um, we saw the student loan 0:08:02.840 --> 0:08:06.720 proposal yesterday and we estimated that that will boost core 0:08:06.720 --> 0:08:10.720 inflation by about point to percentage point, with a risk 0:08:10.800 --> 0:08:14.480 of it being higher. And you know, just if you 0:08:14.520 --> 0:08:17.880 think about the trade off between price and unemployment, that 0:08:18.000 --> 0:08:22.880 little bit a point to percentage point extra inflation would 0:08:22.920 --> 0:08:26.280 cost the said two tighten even more in order to 0:08:26.320 --> 0:08:30.200 generate an eight hundred fifteen thousand job losses in order 0:08:30.240 --> 0:08:32.760 to bring it, you know, to offer up those little 0:08:33.120 --> 0:08:36.000 zero point two percentage points. So it's not even though 0:08:36.000 --> 0:08:38.640 it sounds like a little just a little bit of inflation, 0:08:38.760 --> 0:08:42.120 in fact, it's pretty like substantial from from a view 0:08:42.160 --> 0:08:45.920 assume a flat Philip's curve. For the record, Anna, I 0:08:45.920 --> 0:08:48.160 would love to be at a cocktail hard idea. Can 0:08:48.200 --> 0:08:50.320 I just say that? I would? You know, you're invited 0:08:50.360 --> 0:08:52.920 to the next one? I have um, step one, get 0:08:52.920 --> 0:08:56.320 a bar card, step two, and long um. But but 0:08:56.440 --> 0:08:58.520 you know what I'm curious about, and what I would 0:08:58.520 --> 0:09:01.160 probably ask you at said cock party is how much 0:09:01.160 --> 0:09:02.920 can the Federal Reserve really do here? I mean, you're 0:09:02.920 --> 0:09:05.560 talking about them, I mean everyone's talking about them, looking 0:09:05.600 --> 0:09:08.760 to be extra extra hawkish, But what more can they 0:09:08.800 --> 0:09:12.400 really even say here? They've already said that a recession 0:09:12.480 --> 0:09:14.840 is on the table. They're willing to make that that bet. 0:09:14.880 --> 0:09:16.800 That's not their base case scenario, but they are willing 0:09:16.840 --> 0:09:19.319 to do it at the tackle inflation at the expense 0:09:19.440 --> 0:09:23.040 of a recession. The markets have a very high standard 0:09:23.080 --> 0:09:26.120 for Chairman Powell tomorrow. What else can the Federal Reserve 0:09:26.240 --> 0:09:29.080 really do here? When they're going meeting to meeting and 0:09:29.080 --> 0:09:33.200 the data is literally all over the place. Yeah, Cretty, 0:09:33.240 --> 0:09:35.920 that's that's a very good question. I think it will 0:09:35.960 --> 0:09:39.400 be very hard for for him to to be more 0:09:39.480 --> 0:09:43.320 hawkish than what the market is already expecting. Tomorrow, he 0:09:43.920 --> 0:09:47.080 you know, he may be able to say that this 0:09:47.040 --> 0:09:50.760 is the injection. The whole theme is about reassessing constraints 0:09:50.760 --> 0:09:54.120 and the economy. It's all about examining what our star is, 0:09:54.280 --> 0:09:58.000 what youth star is, what all the stars are. And 0:09:58.000 --> 0:10:00.840 and I think that that if he is able to 0:10:00.880 --> 0:10:04.160 say something like, oh, in fact, that our star um 0:10:04.280 --> 0:10:07.960 or or tomorrow's research papers are arguing that our star 0:10:08.080 --> 0:10:11.080 in fact substantially higher than two point five percent of 0:10:11.160 --> 0:10:15.000 the median f MC participate participant thinks right now that 0:10:15.280 --> 0:10:18.800 if he acknowledged that, that that's very hawkish. If he 0:10:19.000 --> 0:10:23.800 acknowledged that the youth star is like six percent natural 0:10:23.880 --> 0:10:26.400 rate of unemployment and that the FED will need to 0:10:26.480 --> 0:10:29.600 generate an unemployment of up to six percent, well that 0:10:29.640 --> 0:10:32.600 would be really hawkish. But that that's why I said 0:10:32.640 --> 0:10:36.800 he would need to offer up some numerical something numerical 0:10:36.920 --> 0:10:40.559 and something concrete to to come across is very convincing, 0:10:40.679 --> 0:10:43.720 and and I just don't think that he would do 0:10:43.800 --> 0:10:46.360 that tomorrow. However, I think they have a chance to 0:10:46.360 --> 0:10:50.079 do in the September September flmc WH where they will 0:10:50.160 --> 0:10:53.400 have an updated SEP at that point that UM, I 0:10:53.400 --> 0:10:57.000 would expect that the neutral rate could be revised up 0:10:57.040 --> 0:11:00.640 from the current two point five So you know, and 0:11:00.840 --> 0:11:02.520 when you guys came out with that five percent number, 0:11:02.559 --> 0:11:04.640 it was again way out of consensus. So kudos to 0:11:04.679 --> 0:11:07.160 you and your team here. But one of the things 0:11:07.240 --> 0:11:11.040 I look at the you know, the labor market, and 0:11:11.080 --> 0:11:14.520 I still see a pretty strong labor market is is 0:11:14.559 --> 0:11:17.079 that is it real? Do you think or do you 0:11:17.080 --> 0:11:19.120 think there's some underlying week to say that the FETE 0:11:19.160 --> 0:11:20.839 is paying attention to that we may not see in 0:11:20.880 --> 0:11:25.679 the numbers. I think it's real. So if you look 0:11:25.720 --> 0:11:28.960 at the direction of revisions, we just got to manage 0:11:29.000 --> 0:11:32.240 your revisions on jobs yesterday. In fact, it turned out 0:11:32.280 --> 0:11:35.240 that last year, up to earlier this year, the labor 0:11:35.280 --> 0:11:38.839 market was half a million jobs hotter more than what 0:11:39.200 --> 0:11:42.640 statistics actually show. That's on top of every month we 0:11:42.640 --> 0:11:46.240 have been getting our revisions. I think the issue here, 0:11:46.800 --> 0:11:50.640 UM is really productivity. UM. That's that explains to why 0:11:50.679 --> 0:11:55.120 the g d I, the gross Domestic income measure of 0:11:55.200 --> 0:11:58.559 GDP and GDP are telling you a different story. G 0:11:58.720 --> 0:12:02.080 d P is saying the economic activity contracted g d I, 0:12:02.160 --> 0:12:06.920 which is an income based measure that used hours, work times, wages, 0:12:07.280 --> 0:12:10.120 and corporate profits. That's telling you that the economy is 0:12:10.160 --> 0:12:12.760 doing pretty well. And I think that the thing to 0:12:12.840 --> 0:12:15.320 bridge them all is that, in fact a lot of 0:12:15.320 --> 0:12:18.679 people are being hired, but they're probably less productive than 0:12:18.720 --> 0:12:21.559 before because people are calling sick and there are a 0:12:21.640 --> 0:12:24.280 lot of sick leaves that that that's not being recorded. 0:12:24.559 --> 0:12:27.160 So that's why we also have negative productivity. I think, 0:12:27.280 --> 0:12:30.440 I I personally, that's my theory of what's going on. 0:12:30.800 --> 0:12:32.800 And I'm gonna put you on the spot here thirty seconds. 0:12:32.960 --> 0:12:38.240 How much unemployment is too much? Unemployment? Um, you know, 0:12:39.320 --> 0:12:42.160 every kind of unemployment is if bad, even one extra 0:12:42.360 --> 0:12:45.880 job lass is bad. So uh, you know. But however, 0:12:46.040 --> 0:12:50.000 price stability will be important in it ensuring a long expansion. 0:12:50.160 --> 0:12:54.080 As Power said, all right, Anna, good stuff again you guys, 0:12:54.400 --> 0:12:56.600 you and your team. Ana, we're just really early and 0:12:56.720 --> 0:13:00.679 looking increasingly correct with your call with where this you know, 0:13:00.679 --> 0:13:03.120 this natural rate may go here and we'll hear more. 0:13:03.640 --> 0:13:06.760 Fed Chairman Pale tomorrow from Jackson Hole Anna Wong. She's 0:13:06.760 --> 0:13:10.080 the chief OS economist for bloomerk economics, and you know, creaty. 0:13:10.080 --> 0:13:11.760 When she came out with that call, I was like, whoa, 0:13:11.840 --> 0:13:13.480 because the street was at like two and a half 0:13:13.520 --> 0:13:15.520 percent at the time, and she came out with this 0:13:15.559 --> 0:13:18.320 five percent number. And she may be proven right. And 0:13:18.320 --> 0:13:19.559 when all is said and done, you know, one of 0:13:19.559 --> 0:13:22.160 the criticisms of the Federal Reserve right now in economics 0:13:22.160 --> 0:13:24.560 at large simply that they're getting their forecasts wrong. Paul 0:13:24.600 --> 0:13:26.760 I ad venture to say, I think the youth government 0:13:26.800 --> 0:13:30.280 lost Annah Long and that's maybe why. Yes, exactly exactly, 0:13:30.320 --> 0:13:36.720 so we're fortunate to have her there. All right, let's 0:13:36.720 --> 0:13:41.600 go to Amber Fairbanks, portfolio manager for Mirova up in Boston, 0:13:42.000 --> 0:13:45.960 and that makes sense. She's undergraduate from umss Amherston, an 0:13:46.040 --> 0:13:49.480 NBA from Boston College. So all in Boston, go yankees, 0:13:49.880 --> 0:13:52.280 uh Amber, thanks so much for joining us here. What's 0:13:52.320 --> 0:13:57.880 the investment theology focused strategy at your firm? Rova and 0:13:58.160 --> 0:14:01.679 some rather approach this stainable one. We're really looking at 0:14:01.720 --> 0:14:06.040 exploiting market inefficiencies that we see around long term secular trends, 0:14:06.120 --> 0:14:08.360 as well as the belief that the market is really 0:14:08.440 --> 0:14:11.280 underestimating the risk coming from poor e s G practices. 0:14:13.080 --> 0:14:15.360 So let's talk about those E s G practices. I mean, 0:14:15.920 --> 0:14:18.000 to me, it feels like the s G was all 0:14:18.120 --> 0:14:21.480 arraged maybe two years ago when the pandemic first struck, 0:14:21.520 --> 0:14:24.240 for a variety of reasons, um, including how we want 0:14:24.240 --> 0:14:26.520 to really deal with our our footprint. But I'm curious 0:14:26.520 --> 0:14:29.440 about how that's evolved in light of I think the 0:14:29.520 --> 0:14:33.400 recent criticism has gotten. Yeah, I think we've seen some 0:14:33.520 --> 0:14:36.240 recent criticism starting really the beginning of this year. I 0:14:36.280 --> 0:14:38.680 know with the Baron's article that came out. There's a 0:14:38.720 --> 0:14:42.840 similar economists Economist article that came out as well. Um, 0:14:42.920 --> 0:14:45.680 you know, I think that certainly there's there's reasons to 0:14:45.760 --> 0:14:48.800 be looking a little bit closely at E s G 0:14:48.800 --> 0:14:51.479 given the popularity, and I think, you know, the criticism 0:14:51.480 --> 0:14:56.160 contains some brain of truth, particularly around the inconsistent implementation 0:14:56.360 --> 0:14:59.120 of E s G frameworks by investors and kind of 0:14:59.160 --> 0:15:01.880 E s G being used is virtue signaling as opposed 0:15:01.880 --> 0:15:04.720 to really having real world impact. But you know, I 0:15:04.720 --> 0:15:08.280 think really these are effective debating points, but really none 0:15:08.280 --> 0:15:12.080 amounts to anything close to a disqualifying argument. I think, 0:15:12.120 --> 0:15:15.160 really the attention to e FC issues becomes a biduciary 0:15:15.240 --> 0:15:19.520 duty to investors and to company managers and directors because 0:15:19.520 --> 0:15:22.120 of financial materiality. And I think that's the most important 0:15:22.240 --> 0:15:25.480 point is that history has really shown that attention to 0:15:25.560 --> 0:15:29.160 e sc issues it's really increasingly important in the creation 0:15:29.240 --> 0:15:31.440 and preservation of value. And certainly there's done a lot 0:15:31.440 --> 0:15:35.560 of examples like the VP Deepwater Horizon explosion, you know, 0:15:35.640 --> 0:15:39.239 Facebook data privacy, that have really pointed to the importance 0:15:39.280 --> 0:15:42.200 of considering e s G issues um serverally becomes a 0:15:42.240 --> 0:15:46.560 management of intangible issues around brand and reputation, human capital, 0:15:46.640 --> 0:15:50.080 for example. So I think that e s G and 0:15:50.120 --> 0:15:54.720 shareholder capitalism are really fundamentally about good governance. The idea 0:15:54.800 --> 0:15:58.480 that it's kind of about inconsistent implementation. It's certainly that's 0:15:58.480 --> 0:16:01.000 a fair point across some managers, but it really about 0:16:01.000 --> 0:16:03.600 politicizing e s G investing, which I think is what 0:16:03.640 --> 0:16:06.760 we've seen in the media recently. You're kind of conflating 0:16:06.800 --> 0:16:10.320 at virtue signaling and values based investing and really debate 0:16:10.360 --> 0:16:14.840 about wokeism, where really it's just underestimating the changing nature 0:16:14.840 --> 0:16:17.960 of business value creation. Amber give us an example of 0:16:18.160 --> 0:16:20.920 a name that's in your portfolio or something you've recently added, 0:16:20.960 --> 0:16:25.120 and how it might fit into your E s G framework. 0:16:26.320 --> 0:16:29.200 So one of the companies we added UM in December 0:16:29.320 --> 0:16:31.800 last year and then added to more recently is Macado Libre. 0:16:32.360 --> 0:16:35.480 It's an e commerce and fintech company in Latin America, 0:16:35.840 --> 0:16:39.000 especially a really interesting company that the largest e commerce company. 0:16:39.000 --> 0:16:40.880 And I think if you look at the growth of 0:16:40.920 --> 0:16:43.400 e commerce in Latin America, only about six percent of 0:16:43.440 --> 0:16:46.040 retail sales in Latin America are coming from e commerce. 0:16:46.400 --> 0:16:49.320 That compared globally to around eighteen percent. Such a tremendous 0:16:49.320 --> 0:16:52.040 opportunity for growth there. The company has a really strong 0:16:52.080 --> 0:16:55.200 competitive advantage as well. And then within fintech. You know, 0:16:55.200 --> 0:16:57.880 if you look at Latin America, about fifty of adults 0:16:57.920 --> 0:17:01.240 are unbanked. It's really to lead a poverty. To provide 0:17:01.240 --> 0:17:05.000 for academic growth, these people need access to affordable financial 0:17:05.000 --> 0:17:07.800 systems and that's something that Accatto leave I provide. So 0:17:07.880 --> 0:17:09.520 a company that we were able to add to what 0:17:09.600 --> 0:17:12.440 we think is a really attractive valuation. It's certainly a 0:17:12.520 --> 0:17:15.640 growth company UM and I think, you know, it's been 0:17:15.720 --> 0:17:18.040 such a sentiment driven market, particularly in the beginning of 0:17:18.119 --> 0:17:20.879 the year, with growth selling officers sharply. But a company 0:17:20.880 --> 0:17:23.840 that continues to put very very strong fundamental So we 0:17:23.960 --> 0:17:26.320 kept our long term valuation approach and we're able to 0:17:26.320 --> 0:17:28.879 exploit and the short termism that we're seeing in the 0:17:28.880 --> 0:17:31.880 market today. So from an E s G perspective, I mean, 0:17:31.960 --> 0:17:34.720 just shut some light for me on this Mercatto Libre story, 0:17:34.760 --> 0:17:37.439 because for our international audience who aren't perhaps it's familiar. 0:17:37.480 --> 0:17:39.000 The way I like to think about and Paul correct 0:17:39.000 --> 0:17:40.679 me if I'm wrong here, is that it's kind of 0:17:40.680 --> 0:17:44.000 the Amazon of Latin America to some extent the eBay 0:17:44.000 --> 0:17:47.760 even if you will, I'm curious why the investing case 0:17:47.800 --> 0:17:50.440 from Ricatto Libre differs from that on Amazon when it 0:17:50.480 --> 0:17:53.200 comes to an E s G basis. So it was 0:17:53.280 --> 0:17:56.040 Amazon has been a lot of socialities that have us concerns. 0:17:56.080 --> 0:17:59.000 You have our treatment of workers, for example, as well 0:17:59.040 --> 0:18:02.439 as their men Somemen, a third party manufacturing, and so 0:18:02.600 --> 0:18:05.640 it's really those social issues that have us concerned around Amazon. 0:18:05.680 --> 0:18:09.240 I think, you know, from a fundamental perspective, from a 0:18:09.280 --> 0:18:12.840 secular trend perspectives, a company is certainly attractive, but it's 0:18:12.880 --> 0:18:17.240 really the idea that eventually, over time, those issues, if 0:18:17.240 --> 0:18:19.960 not managed to correctly, have a financial impact on the company, 0:18:20.240 --> 0:18:22.400 and I think we've seen that with companies like Amazon 0:18:22.440 --> 0:18:25.360 to a certain extent, but more companies like Facebook for example. 0:18:25.520 --> 0:18:30.480 In the alphabet. So Mercedes Benz is also another name 0:18:30.640 --> 0:18:34.080 here for you guys, give us the case there for 0:18:34.520 --> 0:18:38.560 Mercedes Benz. So we add a Mercedes to the portfolio 0:18:38.680 --> 0:18:41.400 in March's a company that has a really strong plan 0:18:41.520 --> 0:18:45.240 orund the electrification of vehicles. They're targeting fifty of sales 0:18:45.280 --> 0:18:49.520 from EPs by the year and then from ebes By 0:18:50.600 --> 0:18:53.240 and they put forty billion euros and cappex to really 0:18:53.240 --> 0:18:56.440 tool factories and step up software efforts and so really 0:18:56.480 --> 0:18:58.520 a strong plan that we think is addressing that growth 0:18:58.560 --> 0:19:02.440 towards electric vehicle. It's a company that we bought after 0:19:02.480 --> 0:19:05.280 the rush of Ukraine conflicts a lot of concerns in 0:19:05.320 --> 0:19:08.320 the short term around supply chain, but I think if 0:19:08.320 --> 0:19:10.439 you look at the long term value of Mercedes, it's 0:19:10.520 --> 0:19:13.600 very much intact stocks trading at a PETE multiple of 0:19:13.720 --> 0:19:16.040 less than five times, has about a thirty percent great 0:19:16.040 --> 0:19:18.760 cash flow yield. I think it's a very attractive stock 0:19:18.800 --> 0:19:23.960 here today. So for your clients, do your clients, for 0:19:24.080 --> 0:19:27.080 your funds to date? Is the E s G part 0:19:27.160 --> 0:19:30.600 of your offering. The primary driver why they're with you 0:19:30.600 --> 0:19:34.960 guys as opposed to somebody else, is that your typical client. 0:19:36.800 --> 0:19:38.679 You know, I would say it really comes down to 0:19:38.760 --> 0:19:41.320 performance over the long term, and I think that that's 0:19:41.440 --> 0:19:44.240 really what's driving the growth of our assets, where you know, 0:19:44.240 --> 0:19:46.840 they've grown tremendous new over the last several years. And 0:19:46.880 --> 0:19:48.800 I think that that's at the end of the day, 0:19:48.800 --> 0:19:51.400 what's going to continue to drive E s G fun 0:19:51.480 --> 0:19:54.280 flu um. It's it's really that integration of E s 0:19:54.320 --> 0:19:57.440 G to really help us understand company culture, for example, 0:19:57.880 --> 0:20:00.480 help us understand the company management team in really how 0:20:00.520 --> 0:20:03.560 companies are addressing both risks and opportunities around E s G, 0:20:03.880 --> 0:20:06.159 which we think is very material in the creation or 0:20:06.160 --> 0:20:09.040 destruction of a company value. And we're talking to us 0:20:09.080 --> 0:20:10.840 about data because you know, when I go do my 0:20:10.880 --> 0:20:13.800 financial analysis, uh, you know, I can look at income statements, 0:20:13.840 --> 0:20:17.400 balance sheets, casual statements, they're all audited. I kind of 0:20:17.480 --> 0:20:19.280 get a sense I can compare and do all that 0:20:19.359 --> 0:20:21.879 kind of work. Uh. And Bloomberg actually one of the 0:20:21.880 --> 0:20:24.840 most widely used functions on the Bloomber terminals FA for 0:20:24.880 --> 0:20:28.720 financial analysis. Talk to us about the data that's available 0:20:28.760 --> 0:20:31.840 to do e s G analysis. I've heard that it's 0:20:31.920 --> 0:20:36.919 it's not nearly as robust as financial data is. Where's 0:20:36.920 --> 0:20:39.760 the industry there and what could be done? Yeah, I 0:20:39.760 --> 0:20:42.480 would definitely agree it's not as robust as you can 0:20:42.600 --> 0:20:45.320 find in balance seats and income statements as well as 0:20:45.600 --> 0:20:48.879 on Bloomberg. But I think you know it's really because 0:20:48.880 --> 0:20:52.240 there's a subject subjective element right now still at the 0:20:52.240 --> 0:20:55.119 e s G. There's also not a lot of transparency 0:20:55.160 --> 0:20:58.120 when you're using a lot of these third party rating agencies. 0:20:58.400 --> 0:21:01.200 They're relying a lot on the company to closures, which 0:21:01.200 --> 0:21:03.080 can often lead to a large cat bias where you 0:21:03.119 --> 0:21:05.240 have companies that are disclosing a lot around e s 0:21:05.280 --> 0:21:08.399